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CNN LOU DOBBS MONEYLINE

U.N. Nuclear Monitoring Agency Concerned Over North Korean Crisis; Warplanes Attack Iraqi Military Command, Control Facilities

Aired December 26, 2002 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JAN HOPKINS, GUEST HOST: Good evening. The head of the U.N.'s Nuclear Monitoring Agency today said the North Korean crisis is very worrying. North Korea is transferring fuel rods to a nuclear reactor that could be operational in a month. Experts say the reactor could be used to produce dozens of nuclear weapons.
Kitty Pilgrim has the story.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNNfn CORRESPONDENT (voice-over): The International Atomic Energy Association says North Korea's move to activate nuclear facilities is, quote, worrisome would and require the United Nations to step into halt what it calls nuclear brinkmanship.

MOHAMED ELBARADEI, INTL. ATOMIC ENERGY AGENCY: I think if the situation continues the way it, is we'll probably be tossing the issue in few weeks to the Security Council.

PILGRIM: The North Koreans are trying to convince the world they are unfreezing nuclear facilities to produce electricity. No one is fooled. North Korea has broken seals and disabled U.N. surveillance devices at four nuclear facilities. 55 miles north of the capital Pyongyang. South Korea is not complaining loudly. South Korean President Kim Dae-Jung held a high-level national security meeting Thursday, but he has long favored constructive engagement with North Korea. A so-called sunshine policy rather than a hard ball approach. The incoming president, Roh Moo-hyun wants to continue that approach. That reflected today in comments by South Korea's foreign policy secretary.

YIM SUNG-JOON, S. KOREAN FOREIGN POLICY SECY. (through translator): But our government won't jump to conclusions, even though we're in the middle of high tension.

PILGRIM: There are 37,000 U.S. troops along the demilitarized zone that marks the border between North and South Korea. Korean experts say it's a diplomatic crisis not a military one yet.

ROBERT DUJARRIC, HUDSON INSTITUTE: It's up pre-crisis level. I think we're seeing diplomatic and posturing and brinkmanship. I don't think that North Koreans are preparing for an attack, and I think they do understand that if they move from a situation where they're threatening war to one that is war situation, they would lose because in a multiconfrontation against the U.S., North Korea would be crushed.

PILGRIM: It's important to take a tough line with North Korea because of the global implications

(END VIDEOTAPE)

PILGRIM: Britain, France and Germany today made statements condemning North Korea's belligerent posture regarding proliferation -- Jan.

HOPKINS: Thank you. Kitty Pilgrim.

The White House will consider negotiating with North Korea once the country abandons its nuclear program. We're joined by Suzanne Malveaux near the president's ranch in Crawford, Texas -- Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Jan, the president and the first lady are spending the remainder their holiday at their Crawford Ranch for a quiet vacation. The first couple arriving about 12:00 noon Eastern Standard. But President Bush being briefed daily on intelligence as well as security matters, specifically monitoring the situation in North Korea and Iraq.

Now while President Bush is not speaking publicly in the trouble in those regions, a senior administration official telling CNN that the U.S. strategy is to make sure to keep North Korea in a box, not to allow it to create a crisis. But for the U.S. to continue to work with our allies South Korea, Russia, China, as well as Japan to put as much diplomatic as well as economic pressure on North Korea.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Both Russia and China have some influence, the question is how much, and we'll have to wait and see whether it's sufficient. My guess is this process will go on for a while. And what's at risk here is not only stability and peace on the Korean peninsula but is the International Atomic Agency nonproliferation regime, it's not only North Korea it's Iran and, of course, Iraq.

(END VIDEO CLIP)

MALVEAUX: Now, senior administration official tells us there is no need for the U.S. to change its strategy at this time. Having said that, the head of the International Atomic Energy Agency Mohammed El Baradei says if he does not see the monitors within the country in the next two weeks, they'll assemble the U.N. Security Council to deal with North Korea as well as Iraq -- Jan.

HOPKINS: The issue seems to be North Korea. What about Iraq? Is there concern there at the western White House about what's going on in Iraq?

MALVEAUX: Well, absolutely, and they're allowing diplomacy to play out. Really was they're doing is pushing weapons inspectors to get at the site, providing more sensitive information seeing how that goes. And also of course, as you know Jan, the critical key issue here is whether or not the Iraqi scientists can get out of country to be interviewed. Some have been interviewed inside, they have gotten some information but they feel if they can get them outside of Iraq they can get more sensitive information. But of course, that is a big political juggling act. They have to make sure they can grant them asylum and get their family's out and safe. All of the issues have to be worked out.

HOPKINS: A lot of president's plate internationally. What about domestically, what about the economy?

MALVEAUX: Economy number one on the president's list as well. We expect he'll introduce a proposal some $300 billion economic stimulus package in the months to come. Part of that will be tax cuts to the incentives -- rather corporate dividends that is to jump-start the economy to create jobs, really to put that on the table hopefully to get the investors confident in the markets again. That is something the president is working on as well.

HOPKINS: Suzanne Malveaux, a busy vacation for the president in Crawford, Texas.

American and British warplanes today attacked Iraqi military command and control facilities. The raid took place in the Southern no-fly zone, it was the first strike in the south since December 20. Coalition aircraft stepped up their raids since early September. They have attacked about 50 Iraqi targets in the Southern zone over the past four months. That includes six attacks in the south and north in the first four months of this year.

U.N. weapons inspectors in Iraq returned to the University of technology in Baghdad today. They toured laboratories and spoke with teaching and research staff. The head of the university said the inspectors ask how the faculty was organized and what research it did for the government. The inspectors checked previous equipment that was tagged.

Iraqi today promised to produce a list of Iraqi scientists for U.N. weapon inspectors to interview privately. A top Iraqi official said the list would be handed over within two or three days. The United States wants interviews to be held outside Iraq, so the scientist can speak more freely about arms programs.

National Security correspondent David Ensor has that report.

(BEGIN VIDEOTAPE)

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): Iraqi nuclear scientist brought secrets about Saddam Hussein's weapons with him when he defected to the west in the '90s. And he says only by interviewing Iraqi scientists outside Iraq will the United Nations inspectors find out what weapons still exist.

KHIDHIR HAMZA, FMR. SENIOR IRAQI SCIENTIST: It could be the Achilles' heel of Saddam and his weapons of mass destruction programs. ENSOR: An Iraqi scientist's entire extended family one former inspector says might need to be brought out of Iraq before he or she could talk freely.

RAY ZILINSKASS, FMR. U.N. WEAPONS INSPECTOR: I would certainly day grandmothers, grandfathers, maybe first cousins, it's hard to tell how brutal they would be because they are trying to make a lesson.

ENSOR: The U.N. has start conducting some interviews inside Iraq. And says it will ask scientists if they want to be moved out of the country. But General Amin scientist and spokesman predicted many will refuse, including him.

GEN. HOSSAM MOHAMMED AMIN, IRAQI MONITORING DIRECTORATE: Because I don't like to leave my country and be interviewed there abroad. If there is any questions let them address it to me here in Iraq.

ENSOR: U.N. officials like Chief Inspector Hans Blix say taking scientists secretly out of the country to talk would be extremely difficult.

HANS BLIX, CHIEF WEAPONS INSPECTOR, U.N.: I don't think that's what the inspectors for. Nor do I think we are an abduction agency.

ZILINSKASS: Even before I helped western government, once they found out, three attempts were made on my son's life.

ENSOR: Eventually his immediate family did get out of Iraq, and warnings were given in Baghdad not to touch his other relatives. He argues those that have started inside Iraq are a big mistake.

ZILINSKASS: Nobody will show readiness inside Iraq to talk. Because this could alert the Iraqi government, and end up in his death and his family members' death also.

(END VIDEOTAPE)

ENSOR: U.N. officials are currently negotiating with the U.S. and others on this tricky question. What this if an Iraqi scientist were brought out and refused to talk after all? Will they still be promised U.S. Visas and resettlement. It is not an easy issue -- Jan.

HOPKINS: David Ensor, thank you.

The Iraqi Government has banned longtime, CNN, Baghdad bureau chief Jane Arraf from Iraq. No reason was given. Arraf been the only westerner to serve as Baghdad based bureau chief and correspondent over the past four years. CNN will maintain it's Baghdad bureau with other staff.

Arraf is the fourth CNN correspondent to be banned from Iraq, the others are Christiane Amanpour, Wolf Blitzer, and Richard Roth.

Nine Palestinians were killed today as Israeli trooped launched a series of rates in the West Bank and Gaza. 25 Palestinians and 12 Israel -- five Israelis soldiers were wounded. The Israeli army described the raids are counter-terrorism.

Jerrold Kessel reports from Jerusalem -- Jerrold.

JERROLD KESSEL, CNN DEPUTY JERUSALEM BUREAU CHIEF: Jan, indeed a day of deaths in the West Bank and Gaza, nine Palestinians in the last 24 hours, killed by Israeli force, seven in the West Bank, two in Gaza. And most of them were Israeli -- were militants sought by the Israeli army as they stepped up the Israeli troops their offensive into the Palestinian towns in the search of wanted men and this occurred in a number of towns on the West Bank.

Two of the people to die were a teenagers said to be innocent bystanders as the Israelis went after those wanted men. And there were several exchanges of fire as well, and five Israelis wounded in one of those exchanges.

Now down in Gaza, two Palestinians were killed last night, apparently as they were trying to penetrate one of the perimeter fences of one of the Jewish settlements there and were shot and killed by Israeli troops. And this comes as news breaks that the Israeli army is planning to set up sort of buffer zones outside some of the more problematic outlying settlements to help protect them beyond the perimeter fence. All very much an explosive situation, as Israel continues its reoccupation of Palestinian towns now for several months.

That's really a fact of life from the West Bank now, and into this mix comes a new development which we discovered as a result of documents which CNN has obtained, official Israeli working papers which showed that the Israeli -- the Israelis are plans to introduce and already are introducing new measures which amount to -- these are the documents -- some of the documents we are seeing -- amount to a reordering of their relationship with ordinary Palestinians as they continue the security drive for the militants to try to alleviate the lot, the plight of ordinary Palestinians to offer or to facilitate the provision of better services for everyday life for the Palestinians.

Now this Israelis argue, as they've been under a lot of pressure from the United States and from others to make sure that the ordinary Palestinian people don't suffer in this ongoing conflict. That these measures designed to get ordinary Palestinians to work, rather than with the Palestinian authority, and international organizations with the new Israeli administration. It's also an explosive mix. It's very controversial because the Palestinians see it as Israel trying simply to deepen its hold on Palestinian areas to the exclusion of the Palestinian authority -- Jan.

HOPKINS: Jerrold Kessel in Jerusalem, thank you.

Holiday salvation came in the form of the Coast Guard for a group of abandoned Cuban defectors. Thirty-six men, women and children were dumped on a tiny, desolate island in the Bahamas after paying immigrant smugglers to sneak them into the United States. Left without food or water since Christmas Eve, the group waved down a passing Coast Guard jet. Today, the Cubans were picked up by the Coast Guard cutter, given food and water before being turned over to Bahamian officials.

Demonstrators returned to the streets of Caracas today, calling for the resignation of President Hugo Chavez. Workers have been striking for three and a half weeks with the exception of Christmas Day.

The general strike has virtually shut off Venezuela's oil production. That has caused oil prices to rise sharply in the United States. Crude oil was up another 52 cents today. It closed at $32.49 a barrel. It's the highest level in more than two years.

A hostage drama at a Japanese bank has stretched into a second day. Police said that a desperate bank customer took four people hostage yesterday. Authorities say that the hostage-taker was angry at bank's refusal to forgive a large loan. He later released two of the hostages, but warned he would rather die than give himself up. Media reports said the man borrowed millions of dollars for his real estate firm which recently went bankrupt. Police say that the slump in the Japanese economy has led to a series of incidents involving people who cannot pay their debts.

Still to come on MONEYLINE, a West Virginia building contractor has won $315 million Powerball lottery. We'll tell you what he plans to do with his cash.

Hundreds of thousands of families are facing an insurance nightmare because of an oversight by Congress. We'll have a special report.

Americans rush to the malls today. We'll tell if you it will be enough to lift the gloom in the retail sector.

And on Wall Street, the markets reversed course by the end of the day. The Dow was down 15 points. The Nasdaq fell more than 4 and the S&P 500 was down 3.

North Korea's nuclear ambitions have set off alarm bells around the world. We'll look at the risks of an escalation in the crisis with Joel Wisk (ph), a leading specialist on Asian security.

(COMMERCIAL BREAK)

HOPKINS: The crises in Iraq and North Korea have raised the possibility that the United States may have to fight two wars at the same time. Defense Secretary Donald Rumsfeld says the United States could fight and win two wars at once, if necessary, but some defense analysts believe it would be very hard to fight two wars at the same time because of military cutbacks since the end of the Cold War.

CNN military analyst General David Grange joins us now to talk about this.

General Grange, what do you think? Is it possible to fight two wars at the same time with the equipment and the person power that we have now in the U.S. military? BRIG. GEN. DAVID GRANGE (RET.), U.S. ARMY: I believe the United States has no choice but to be able to use its armed forces and fight two wars simultaneously. You can't be a nation like this country is with that capability.

However, it would be if it was Iraq and North Korea at the same time.

HOPKINS: Because our military is quite small compared to it was -- the way it was just even a few years ago?

GRANGE: It's a small military. It's very powerful, but the military is not that large. And the challenges would be, let's say that we were at war, against Saddam Hussein, and, at the same time, a war started with North Korea. You just don't count the number of bodies a military has, you have to look at the type of specialties, the type of equipment, those capabilities and as shortages in certain essential pieces of equipment and certain type of trained personnel that you need in one theater would be a shortage in the other theater.

HOPKINS: What would the strategy be, though? To fight Iraq first and then North Korea or how would you do you it?

GRANGE: Well, of course, that may not be our choice. If may be -- the enemy may choose that option and they have to go to war with another country before another one, which is not part of our plan.

But I think what you would see is you would see a very aggressive takedown of one country to occupy the capital and dominate the country, and on the other theater of war it would be a holding action and an economy of force operation until you can regroup and then take that country down.

So it would be a time issue.

HOPKINS: Would Iraq be easier than North Korea, do you think?

GRANGE: I think definitely so. I would rather fight in Iraq than North Korea any time.

The North Korean army is very capable. They're dug into the mountainsides. They can destroy a good piece of Seoul because of the distance between Seoul, South Korea and North Korea, the DMZ, very easily regardless of what action we take. And so it's a very tough army and it's not an easy one to take down.

HOPKINS: You would have to have a lot of allied support, wouldn't you?

GRANGE: Well, coalition support would be key to being successful and also affect the timing. The more coalition support that our nation has, obviously, would relieve some of the stress on our forces and one other part of the world.

But, you know, we have to fight getting there. We have to -- we just don't, except for maybe the troopers in Korea, we have to fly or sail to the theater of operations, and so it's tough to project force around the world at any time in, at any place depending on our plan of attack, and so it's very difficult. There's a shortage of the strategic lift to get to the fight.

HOPKINS: General David Grange, thanks for joining us.

GRANGE: My pleasure.

HOPKINS: Coming up on MONEYLINE, a 55-year-old West Virginia, grandfather is a record setting Lottery winner. His jackpot worth $315 million.

(BEGIN VIDEO CLIP)

ANDREW "JACK WHITTAKER, POWERBALL WINNER: The very first thing I'm going to do is I'm going to go home, I'm going to sit down and make out checks to three pastors for 10 percent of this check.

(END VIDEO CLIP)

HOPKINS: Thousands of people in the Northeast are still without power after a massive Christmas Day snowstorm. We'll have the very latest on the cleanup.

And Congress went home for the holidays without renewing the National Flood Insurance Program. We'll tell you what it means for hundreds of thousands of families. All that and more when MONEYLINE returns.

(COMMERCIAL BREAK)

HOPKINS: The only winner of the almost $315 million Powerball Lottery says that he plans to give 10 percent of the money to his church. The West Virginia man also says he wants to put 25 people who were laid off, back to work. Jason Bellini joins us now from Hurricane, West Virginia with more -- Jason.

JASON BELLINI, CNN CORRESPONDENT: That's right, Jan. When Jack Whittaker went before the cameras today he talked about the good things he wants to do with the money.

He admitted the he already -- he's already comfortable with his income. He's a contractor. He works in construction and he's had to lay off over 20 people this year. So he looks forward to the possibility bringing some of them back and using his money to be generous with.

When Jack Whittaker went to the convenience store this morning, he was greeted by reporters.

(BEGIN VIDEO CLIP)

WHITTAKER: I walked in and paid for everything and had to wait in line. It was like -- it must have been 30 people in the store or more. And I had to wait in line and I told the little girl that sold me the ticket, I told her -- I asked her how do you feel today? I said, do you feel different? She said, you won the Lottery, didn't you? I said yes, I did. She says no you didn't, you're not excited enough to have won the Lottery. And she just kind of pushed me on out the door.

BELLINI: Jan, Jack elected to take the money in one lump sum, a lump sum that'll come to around $111 million, that's after all the taxes that are taken out -- Jan.

HOPKINS: He just figured it out this morning, wasn't it, that he had won the Lottery?

BELLINI: That's right. He heard the numbers wrong on the TV so he knew that he won something, but he didn't realize he won the big prize.

HOPKINS: So it was a big surprise. Maybe he was in shock. Maybe that's why he didn't seem so excited about winning.

BELLINI: Perhaps, he seems like a very mellow mannered guy and he didn't want -- he didn't have extravagant plans for the money. He didn't talk about buying a mansion, doing all sorts of things with it like that, well he did talk about wanting to get a helicopter. But he talked about using the money to do good.

HOPKINS: Jason Bellini in hurricane West Virginia, thanks.

The West Virginia's man windfall could help lift his state from the bottom of the income heap. The 2000 Census found that West Virginia ranked last for median family income. A family of four earned about $30,000 in West Virginia. Census figures also show that family income in West Virginia has dropped in recent years. Louisiana and Arkansas are also tied for the lowest median income.

This bring us to tonight's "MONEYLINE Poll." What's the first thing you would do if you won the Lottery? Quit your job, plan a vacation, call your attorney or change your phone number? Cast your vote at cnn.com/moneyline. We'll tell you preliminary results later in the broadcast.

Now the final results to Tuesday's "MONEYLINE Poll." We asked, which is your favorite Christmas movie? Twenty-five percent of you said Miracle on 34th Street," 41 percent chose "It's a Wonderful Life," 17 percent said "Home Alone," the remaining 18 percent said "How the Grinch Stole Christmas."

A number of you also said we skipped some of your favorite Christmas movies. We'll share some of those e-mails later in the program.

The aftermath of a Christmas snowstorm continued to paralyze large portions of the Northeast today. Up to three feet of snow fell in some places, highways were closed, airlines and trains experienced major delays. Whitney Casey reports from Albany.

(BEGIN VIDEOTAPE) WHITNEY CASEY, CNN CORRESPONDENT: Well, today was a beautiful day here in Albany. It was about 32 degrees today and the snow did not come from the sky, but it did certainly swirl up from the ground. And that's what officials are most concerned about tonight.

Just take a look over here. You can see in the air right now tons of snow and that's what it is, 19 inches of snow fell here. It was light and powdery and when the wind picks up at night, like it is right now, gusts up to 50 miles an hour, it lifts that snow into the air and then that creates a huge visibility problem for drivers.

Another thing that they're concerned about are the roadways tonight because of black ice. Because it was so warm and so nice today the ice has then melted and it will be on the streets today, then it comes back as black ice when it gets down to about 18 degree which is what is expected to reach at about 11:00 tonight.

So that's what officials are concerned about here in Albany, but it was a wonderful day.

Whitney Casey, CNN, Albany.

(END VIDEOTAPE)

HOPKINS: Wet weather may have even more of an impact on homeowners after the beginning of the year. That's because Congress failed to reauthorize the nation's flood insurance program before going on its holiday recess. Now real estate transactions will be held up and current homeowners are vulnerable as Casey Wian reports.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNNfn CORRESPONDENT (voice-over): Recent storms that flooded parts of California, Georgia and other states are a reminder that this is an El Nino winter, expected to be wetter than usual.

Now there's more potential trouble for homeowners in flood-prone areas because after January 1, they may not be able to get new flood insurance policies. Congress, in its rush to pass temporary spending bills and adjourned for the year neglected to include the National Flood Insurance Program. So technically, it will not exist after Tuesday. Congress can't restore the program until it returns a week later at the earliest.

BOB RUSBULDT, CEO, INDEPENDENT INSURANCE AGENTS: If you cannot get flood insurance, banks are not going to lend you money if your home is in a flood plain. Therefore, economic activity in that sector will cease to exist, at least for those couple of weeks. Banks are not going to take the chance of not getting their money back. Their loan repaid if you have a flood during that period of time.

WIAN: An estimated 400,000 home mortgages and refinancing is in areas where flood insurance is mandatory, could be delayed.

(on camera): Lenders urge homeowners and buyers who either need new policies or need to renew existing ones in early January to pay up by December 31.

KURT PHOTENHAUER, MORTGAGE BANKERS ASSN.: We're increasingly confident that we're going to be able to find ways around the gap in this insurance that will allow people to still close loans and that will allow people to have confidence that their flood insurance will be intact and they will be covered.

WIAN (voice-over): FEMA, which administers the flood insurance program, says it will remain open for business during what it calls a reauthorization glitch and it expects quick action from Congress to restore the program retroactively.

But if Congress fails to do that and there's a major flood with hundred of millions of dollars in losses, the only people not likely to get soaked are trial lawyers.

Casey Wian, CNN, Los Angeles.

(END VIDEOTAPE)

HOPKINS: Still to come, North Korea continues to take the provocative action of restarting its nuclear weapons program. Joel Wit, senior fellow with the Center for Strategic and International Studies will be here to talk about U.S. options.

America's malls were packed with shoppers today. We'll have a live report and what it means for troubled retailers.

And retailers are not the only ones feeling the pinch, so are America's charities. We'll tell you how charities are responding in the slowdown in giving.

(COMMERCIAL BREAK)

HOPKINS: As we heard, the North Korean nuclear crisis has raised fears that military conflict could once again erupt in the Korean Peninsula.

The latest tensions began when North Korea admitted it has a nuclear weapons program. This admission undermined the 1994 agreement that froze North Korea's nuclear program.

Joining us now is one of the coordinators of that agreement, Joel Wit. He is now a senior fellow with the Center for Strategic and International Studies.

So was there was a failure of that agreement? Is that why we're at the place where we are now?

JOEL WIT, CTR. FOR STRATEGIC & INTL. STUDIES: Well I think certainly, we can't claim that the agreement was a total success. But the fact is that if North Korea's nuclear weapons program had gone unchecked in 1994, the situation today would be a whole lot worse. North Korea would have a much larger stockpile of nuclear weapons that might even run to hundreds of nuclear weapons. So on the one hand, we can't claim it was a total success, on the other hand, the situation could be much worse now without that agreement.

HOPKINS: But how dangerous is North Korea at this point?

WIT: Well, it's very hard to tell and that's precisely the point. It looks like North Korea is heading toward building more nuclear weapons, but that also could be part of their strategy to increase pressure on the United States and to bring us to the negotiating table. That's the problem always facing U.S. officials when dealing with North Korea. We really do not know what their true intentions are.

HOPKINS: So what do you think? Should the United States start talking to North Korea?

WIT: Well, I'm not saying we should run to the negotiating table now and try to cut a deal. I think what we need to do is to put together a strategy that combines both tough measures, like seeking action at the U.N., with also opening the door to talks with them because they're going to need an escape patch if we start escalating the pressure them.

HOPKINS: Do you use maybe China, Japan, other allies in the region?

WIT: Well, that's precisely the point. We need to put a coalition together of all of the countries in the region that will support tough measures if they become necessary.

The problem is most of these countries won't support tough measures unless we demonstrate that we are willing to sit down at the table with the North Koreans and try to resolve this peacefully.

HOPKINS: This is a very difficult situation, clearly.

WIT: Well, it is a very difficult situation and the problem is there are no good options here. And the difficulty confronting U.S. decision makers is that they have to choose the least worst option. And the least worst option in this case is to try to reach some sort of deal with North Korea that heads off this nuclear weapons program and tries to steer them back on the path of better relations with the outside world.

HOPKINS: And at the same time, not being involved in nuclear blackmail.

WIT: Well, you know this may be a fact of life for some time. Until we can get assurance that North Korea does not have any nuclear program whatsoever.

So that's what the process was that we started in 1994. We've experienced some setbacks today, but I think we could get back on to that road if we employ the right strategy and if the North Koreans themselves are willing to sit down and talk. HOPKINS: So do you think it is possible to have some kind of peaceful solution at this point?

WIT: Well, at this point, it's very hard to tell what the peaceful solution will be because the administration will not talk to North Korea. And the North Koreans seem in no mood to sit down and talk to the administration.

So what we need to do is to construct the strategy that will bring the North Koreans to the negotiating table, but also make it very clear to them that if they don't reach a peaceful solution to this problem, we are going to ratchet up the pressure on them.

HOPKINS: What would a second Korean war be like, though?

WIT: Well, that's, of course, it would be horrendous. I mean, a second Korean war, at least the estimates were when I was in the U.S. government, that the casualties of a second Korean war will be a million casualties on the Korean peninsula and the economic costs would be a trillion dollars.

Basically the South Korean economy would probably be destroyed. Japan's economy would be severely weakened. It would trigger a recession, if not a depression in the Pacific Basin. And of course, that would reverberate in the United States.

So I think that's one reason why many people say that we need to treat North Korea differently than the way we're treating Iraq.

HOPKINS: Joel Wit, thanks for joining us.

WIT: Thank you.

HOPKINS: There is still time to vote in tonight's "MONEYLINE Poll" and the question is what is the first thing you'd do if you won the Lottery? Quit your job, plan a vacation, call your attorney, change your phone number? Cast your vote at cnn.com/moneyline. We'll bring you preliminary results in a few minutes.

And coming up, the results are in and they aren't pretty. We'll tell you about the dismal holiday season for retailers.

And retailers aren't the only group that suffered. Charities also experienced a major set back. We'll have a special report.

And one celebrated symbol of Christmas and a very lucrative business. All of those stories and more ahead.

(COMMERCIAL BREAK)

HOPKINS: Shoppers were back in stores today, exchanging gifts and taking advantage of more deep discounting. But it was too late to salvage the weakest retail season in more than three decades.

Mary Snow is outside of Macy's in New York's Herald Square -- Mary. MARY SNOW, CNNfn CORRESPONDENT: Hi there, Jan.

Yes, Macy's slashed prices by as 75 percent to try to attract customers. Crowds have been growing throughout the day, not only here at Macy's, but also at Bloomingdales. Both of stores are owned by the same company, which just earlier this week said that sales were disappointing for the month.

And this is an important week for retailers because this week, the final week of December, makes up about 10 percent of all holiday sales. Stores trying to clear out their inventories.

So while it may not help very much the bottom line for retailers, it's good for consumers. And some came out as earlier as 7:00 a.m. this morning to take advantage of the bargains.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Christmas clearance, Christopher Radco (ph) ornaments, garland, glass ornaments, Santas, especially some of these Santas that are just so gorgeous; too expensive before Christmas, perfect now. So it was great.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: You have the same thing or equal after Christmas at a significantly discounted price, then why not do that?

(END VIDEO CLIP)

SNOW: A lot of forecasts have been lower this holiday season, and Wal-Mart, the world's largest retailer, was the latest to come out cutting forecast for the month of December. Wal-Mart said Yes, sales did pick up in the four days before Christmas, that demand increased, but Wal-Mart said it was too little, too late and now its growth target has been lowered.

Also, ShoperTrack came out today, saying that it is expects all holiday sales to be about 11 percent worse than a year ago -- Jan.

HOPKINS: Mary, what about the snow in the Northeast? Does that keep down the traffic in the stores?

SNOW: Well you know, Jan, that is one of the big factors that retailers always point to, and that has to play in at some point to projections because, this is seen, some believe this could be the busiest shopping day of this holiday season, and, you know, we had several feet of snow in certain parts of the Northeast, and that had to keep shoppers out of the stores.

HOPKINS: Mary Snow, outside of Macy's, thanks.

SNOW: OK. HOPKINS: The disappointing Christmas season continued to pressure stocks on Wall Street. A sharp drop in new jobless claims initially lifted the market. The Dow was up more than 100 points at its high this session, but the gains erased by the closing bell. The Dow, Nasdaq and S&P all slipping less than a percent.

Kathleen Hays is here now to tell us about the session -- Kathleen.

KATHLEEN HAYS, CNNfn CORRESPONDENT: Of course, I had to struggle to battle the snow from Pennsylvania to get back down here.

But I'd say for Wall Street, the story is from sizzle to fizzle. Jobless claims definitely gave the market a lift early on. But then a couple of things happening. The disappointing retail view that Mary Snow gave us, that doesn't give a good picture of the consumer, and another look at the jobless claims. The level is still high. So people are wondering about consumer spending going into the new year.

Beyond that, of course, we got some more mention of global tensions. The oil market, we saw oil up to a fresh two year high. The strike in Venezuela, the threat of war with Iraq. Gold a barometer of global anxiety. The threat of war hitting also there and, of course, rising tensions with North Korea. That was tough for investors, Jan, and I think maybe even more so than anything we got on the domestic front. At the end of the days, those international worries you just can't ignore them, and I think they really weighed on the stock market.

HOPKINS: So from up 100 points to negative for the session. I guess no Santa Claus?

HAYS: Well, you know, people are wondering about the Santa Claus rally, which, according to our financial editor, Myron Kandel, people think of it going into the Christmas, he says it's really you look at period after Christmas going into the new year. So maybe Wall Street doesn't believe in Santa Claus.

But maybe we shouldn't put too much emphasis on anything. Light volume today, the lightest volume of the entire year, even lighter than Tuesday which was a shortened session.

I think it's also interesting -- some more little factoids for you. For the past 52 years, the S&P 500 has always had its best month in December, an average gain of 1.8 percent. So far in this December, the S&P is down 3.8 percent. Apparently there's only one negative month for the S&P in the last 14 years. So this is not good.

HOPKINS: And we're headed for the third year in a row of negative results for the market.

HAYS: And I guess that really hasn't happened since the Great Depression. On the other hand, when did we ever have years like we had preceding it, with those gigantic increases, what some people call a bubble.

So in the Nasdaq, maybe it's not surprising in that context, although it is heartening for many investors to see the declines now.

HOPKINS: Kathleen Hays, thank you.

Turning now to our "Enron Corporate America Criminal Scoreboard." Thirty-four executives have been charged, four of them at Enron. It's now been 390 days since Enron's collapse.

Retailers aren't the only ones suffering because of the uncertain economy and stock market declines. Charities also depend on the holiday season for the bulk of their funding and they too are reporting significant drops in donations.

Susan Lisovicz has the report.

(BEGIN VIDEOTAPE)

SUSAN LISOVICZ, CNNfn CORRESPONDENT (voice-over): There is no shortage of presence at the AIDS Action Committee's annual toy drive in Boston. But financial contributions are another story.

MICHAEL DUFFY, AIDS ACTION COMMITTEE: We've seen a significant decrease in donors who give to us through our direct mail program, people who send in donations through the mail. From last year to this year, it's been a drop of about 75 percent, which is considerable.

LISOVICZ: In this season of giving, that is an all too familiar refrain. Nearly half of charities surveyed say they are seeing a decline in donations this year, and last year wasn't good either.

Despite the $1.8 billion given to September 11-related causes, donations overall decreased by 2.3 percent when adjusted for inflation.

Rising unemployment one of the big factors for the cutback in private donations, which comprised three-quarters of all charitable giving.

Another is the third straight year of declines in the stock market, which is also reined in corporate philanthropy. And stocks are the financial backbone of many foundations. More than 80 percent of these non-profits say they are taking cost-cutting measures.

It's gotten so bad, that pledges made are not always being kept.

EUGENE TEMPEL, INDIANA UNIV.: Major gift donors are not making their commitments. They're holding off to see what happens. And there's even some reporting of multiyear pledges being deferred. That is, people extending three year pledges into five year pledges and that kind of thing.

LISOVICZ: But Americans are still giving.

(on camera): Americans historically share their wealth in good and bad times. In 1999, during the flush days of the bull market, Americans gave $211 billion to charity.

Last year, when the economy was in recession, Americans gave $212 billion.

(voice-over): But the pullback that began in 2001 is hitting some charities particularly hard, such as social services, because the public sector is feeling the pinch of a prolonged economic slump.

BRIAN GALLAGHER, UNITED WAY OF AMERICA: The primary funder of charitable efforts in human services across country is government. So the fact that you've got at least 35 state governments that are running in the red right now, in some cases significant deficits, it means that you are seeing food pantries and housing issues and rent payments, you know, the impact is service to people. And that's under extreme pressure.

LISOVICZ: And that pressure is forcing charities to rethink everything.

How they solicit, whom they solicit from and how they spend the money.

Susan Lisovicz, CNN Financial News, New York.

(END VIDEOTAPE)

HOPKINS: "CROSSFIRE" begins in a few moments. For a preview, let's go to Tucker Carlson in Washington -- Tucker.

TUCKER CARLSON, CNN "CROSSFIRE" CO-HOST: We've got a great show tonight. We've got Don King, the boxing promoter with weird hair, but a wonderful record. We have outgoing House Majority Leader Dick Armey, doing an exit interview with us. And we have a woman who claims adultery is the thing you need to revive your marriage. Unfortunately we don't have all three of them in the same room. That would really be a great show. We have the next best thing. It's going to be a terrific CROSSFIRE, join us.

HOPKINS: Thank you.

The result may not have been what she had hoped for, but Katie Hnida set a record just by stepping on to the field. On Christmas Day, Hnida became the first woman to ever play in a Division I college football game when she came on to kick an extra point for New Mexico.

With a the Lobos leading 6-3, Hnida's point, after attempt, was blocked by UCLA who went on to beat New Mexico, 27 to 13. As for the barrier breaking appearance, the 5'9", 150 pound, ponytailed junior thanked her teammates and coaches for their support.

Coming up, a look at some of your thoughts, plus toy trains. They're not just for kids. We'll tell you about the half a billion dollar business.

(COMMERCIAL BREAK)

HOPKINS: Let's take a first look at the results of tonight's "MONEYLINE Poll." What's the first thing you would do if you won the Lottery? Sixteen percent said you'd quit your job, 12 percent said plan a vacation, 40 percent said call your attorney and 32 percent said change your phone number.

Now for a look at your thoughts. Denny from Buena Park, California wrote to about what he considers a blatant omission in our poll question about your favorite Christmas moves. "On you Web site poll of favorite Christmas movies, you left out `A Christmas Story,' my favorite."

Max in Ontario, Canada said, "Shame on you for omitting `A Christmas Carol' from your survey. It is by far the best Christmas film of all time."

"How the Grinch Stole Christmas" did make our poll options, but Owen in Georgia points out another Grinch. He wrote, "I feel the country has three grinches. One -- the U.S. government which is looking the other way while this country fails. Two -- the corporate crooks that ripped us off. Three -- the large corporations that sent our jobs to other countries."

Paul from Virginia Beach passed along a request to actually help those corporate crooks. "Now that the holiday season is here, please look into your heart to help those in need. Executives of Enron, WorldCom, Tyco and other companies in our very own country are living at or just below the seven-figure salary level right here in the land of plenty. But now you can help for only $20,835 a month, about $694.50 a day, you can help these deprived executives remain economically viable during their time of need. Your commitment of less than $700 a day will enable an unfortunate executive to buy that home entertainment center, trade in the year-old Lexus for a new Ferrari, or enjoy a weekend in Rio."

We should all fall on such hard times. E-mail us your suggestions and comments, moneyline@cnn.com and please include your name and address.

Those were your words, now in their words.

(BEGIN VIDEO CLIP)

GEN. WESLEY CLARK, CNN MILITARY ANALYST: We've always structured the United States armed forces to be able to handle more than one problem at the same time. And during the 1990s, we had the two major theaters of war, potential capabilities, but we're already engaged in Kosovo. We're in Afghanistan and now we're looking at Iraq. So really this is at least a third theater when you talk about Korea. So it would be extremely difficult.

SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: We're coming to a point where the U.S. has got to give some of the evidence that we have over to the United Nations and perhaps begin to talk about it a little more publicly so that the public in America throughout the world will have a better idea of why we're so committed to seeing Saddam Hussein disarm.

WHITTAKER: I just want to thank God for letting me pick the right numbers -- or letting the machine pick the right numbers for me. And I want to say thanks to all my family that believes in me and everything.

And, you know, as for your questions and what I'm going to do with the money. I'm going to pay tithes on it, the very first thing I do. And after that I'm going to take care of my family and then I'm going to expand my business.

(END VIDEO CLIP)

HOPKINS: There are Christmas traditions in many homes across the country and whether they're ringing the Christmas tree, wrapped up as a present or a big holiday display, model trains inspire awe and joy in those young and old alike. Bill Tucker reports.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNNfn CORRESPONDENT (voice-over): There are some things that just can't be denied and there is no denying the magic of model trains.

UNIDENTIFIED MALE: Come over here!

TUCKER: Part of the attraction is fantasy.

UNIDENTIFIED FEMALE: This was the first year we put this up and all of the kids are playing and they're on the slides and seesaws and things like that.

But I just never saw it and people were so worried, they came rushing over and said those children can go out on the tracks. You know within two days I had to put up a fence. People take this very seriously.

UNIDENTIFIED MALE: Look, mommy, look!

TUCKER: And people get very excited.

Treasury Secretary Designate John Snow probably understands, he used to run a railroad. Railroad stocks did once dominate the market and toy trains are currently a half a billion dollar a year industry. So is it money though gives the rails their magic?

(on camera): Wherever it comes from, it has the power to transform the old into the young, make engineers out of bankers and moguls out of children.

(voice-over): And it can turn ordinary human beings into, well...

CHARLES SACHS, SENIOR CURATOR, N.Y. TRANSPORTATION: You are the master of this world. You are the engineer, you're the God. You're creating it and you're running it.

TUCKER: It can also be more benign.

UNIDENTIFIED MALE: I have a childhood memory of being able to set up an American Flyer layout all around the front room in my home and I inherited it from my older brothers and I remember spending hours and hours on the track in different ways.

UNIDENTIFIED MALE: A different way of traveling, laid-back and not as fast.

TUCKER: And then there is the just, plain magical.

ROBERT VALENTINE, TRAINMASTER, N.Y. BOTANICAL GARDEN: I feel a little hand, reach for my hand, put his hand in mine, a little guy, he must have been -- I think he was 3 or 4 and when I looked down, these big brown eyes and he's looking up and he says come, Santa, let's go see the trains.

(END VIDEOTAPE)

TUCKER: For a lot of people, you know, Jan, Lionel Trains is the trains they remember the most during the Christmas holiday season.

HOPKINS: Whatever happened to Lionel the company?

TUCKER: Actually, it's very interesting. Six years ago they were sold to the New York Investment Group and it is now owned by them, among them as one of the part owners, Neil Young, of rock 'n' roll fame and he owns -- part owner of Lionel trains and in fact, rumored -- now I haven't seen him there -- to go to train shows, as well.

HOPKINS: He's clearly a fan.

TUCKER: Yes.

HOPKINS: Thanks, Bill Tucker.

That's MONEYLINE for this Thursday evening, please join you us tomorrow. We'll be joined by the best and brightest in business journalism. Mark Morrison of "BusinessWeek," Robert Lenser of "Forbes" magazine and Susan Fraker of "Fortune." We'll talk about the some of the biggest events of 2002 and what to expect in 2003.

Thanks for joining us. I'm Jan Hopkins in for Lou Dobbs. Good night from New York.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com



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